Archive for March 18, 2020

USA Will Likely Suffer the Most Damage from Coronavirus Pandemic: 2

March 18, 2020 22 comments

In my previous post, I wrote about how structural characteristics of the american economy and long-standing institutional decay will likely result in USA suffering the maximum damage from the Coronavirus pandemic. In it, I also promised to talk about other related issues which make USA especially vulnerable to the direct and indirect damage caused by the COVID-19 pandemic. These include the lack of a usable social safety net, staffing of nursing homes and elder care in general by precariat workers, ideological unwillingness of government to directly workers for lost earnings especially if they are temporary and part-time, the risk of shortages of medicines, chemicals, electronic stuff etc caused by temporary disruption of supply chains in China. So let us dive right in by starting with the issue of a social safety net, or more precisely its lack, in USA.

1] Even the most delusional ‘murican would agree that the social safety net in this country is very meager compared to what exists in other developed countries. While most west-European countries once had similar attitudes towards social safety nets, things changed a lot after WW2. There is a reason why the average European after 1945 decided that working under conditions similar to those found in USA today was unacceptable. And let us be honest about something, the European rich were (and are) not better human beings than their American counterparts. They just had to go along with what the majority in those countries wanted after WW2, or risk losing it all. However, since the USA experienced a long-boom in the aftermath of WW2 (1945-1975) most of its workers never experienced the socio-economic pressures which led to creation of the modern welfare state in European countries.

To make a long story short, socialism never took root in post-WW2 USA because the median american worker in the first three to four decades did not live through prolonged bad times. And this is also why all this current talk of socialism in USA only began after the majority experienced a full decade of stagnation and decline in aftermath of 2008 global financial crisis. So what does all of this portend for the public reaction to the fallout of this ongoing crisis. Well.. let me put it this way. Unemployment rates of over 20% (maybe even north of 30%), even if short-lived, are unworkable in a system without a decent social safety net and where the median person cannot afford to miss even a single paycheck because they have less than 500 dollars in the bank. Things will get very ugly in this country if the government cannot drop a couple of grand of ‘helicopter money‘ per household within the next two-three weeks.

2] To Trump’s credit, he is clever enough to see that this problem and seems to have embraced the idea of ‘helicopter money’. As I have mentioned many times in the past, He may not be a genius (to out it mildly) but the guy is pretty street-smart and is very ideologically flexible when he feels the need to save his behind. Mark my words, he will even channel FDR if necessary to keep the angry mob way from him. Ironically, it is loser establishment democrats such as Pelosi, Schumer etc who are talking about fiscal restraint, “deficits” and “means testing”. To be quite blunt- if Trump is successful with getting the ‘helicopter money’ thing done, along with massive stimulus for especially affected sectors of economy, democrats can forget winning anything let alone the presidency in 2020. Also, let me remind you that Obama did nothing along those lines in 2009 or 2010. And that is why he barely scraped by to win in 2012.

It does not help that between trying to nominate a used-car salesman with dementia (Joe Biden) as their candidate and shouting about Russia, Putin and Ukraine for over three years, they have not done anything big to actually convince potential new voters to vote for them in 2020. Their so-called “victory in the 2018 mid-terms was only possible because Trump was stupid enough to try repealing ‘Obamacare’ without replacing it with a better system. And in case you didn’t notice it, he has learned from that mistake. In my opinion, what happens in USA in the next few months depends on whether Trump can deliver somewhere between 2-4 k to most american households by mid April- at the latest. If he can do that + properly bailout major sectors hit by indirect effects of this pandemic- he will win in 2020. If not, he will be reviled for a long time.

3] Regardless of what he does within next 2-3 weeks, the american economy will enter a steep recession with economic contraction of somewhere between 15-20% in next few months. And no.. these are not the feverish dreams of somebody who wants to see USA fall, but conservative figures floated by people working in supposedly “respectable” banking institutions. I would not be surprised if the economic contraction (and unemployment rate) reached 30% for almost a year. This is great depression territory and much more deeper as well systemic than the GFC of 2008. You know something else, mass unemployment in a country with a functional social safety net at that time was a very important factor for the rise of Hitler to power. And not just him, since almost every strongman of the 1920s-30s (from Mussolini and Franco to many others in East-European countries came to power in the aftermath of mass unemployment and disillusionment with existing institutions and the status quo.

Since we are already close to a thousand words, I will write about the other issues raised in this post in a subsequent part of this unintentional series.

What do you think? Comments?